Slowing the flow: Local businesses oppose biofuel limit

About 80 percent of U.S. biodiesel producers have scaled back output in advance of a proposed cap. Blue Ridge Biofuels founder Woody Eaton says, "We have already laid off employers, and we expect things to get worse. [But] we're always been pretty scrappy." (photo by Cindy Kunst)

A proposed limit on the total volume of biofuels that must be added to conventional fuels each year has prompted Woody Eaton of Blue Ridge Biofuels to ask President Obama for help.

More than 50 businesses and individuals signed Eaton’s letter to Obama in a grassroots effort to highlight the potential impact of the U.S. Environmental Protection Agency’s proposal on biofuel producers, their partners and customers. The letter asks the president to urge the EPA to raise theRenewable Fuel Standard and extend tax credits for producers that expired Dec. 31.

“If they don’t bring up the volumes, prices will continue to fall and it will be harder to be profitable,” says Eaton, co-founder of the Asheville-based company.

The EPA is proposing a series of revisions to the nation’s Renewable Fuel Standard program, Eaton explains. Although biodiesel companies produced nearly 1.8 billion gallons of fuel last year, the agency proposes limiting the volume requirement for 2014 and 2015 to 1.28 billion gallons. By reducing the demand for biofuels, the lower standard puts downward pressure on prices.

“It puts a limit on the industry,” says Randy Dellinger, general manager of Foothills Bio-Energies in Lenoir. “We think homegrown energy is a good thing. Increasing volume increases marketplace: increased demand met by increased supply. It encourages the industry to grow further. If you limit them, it will limit growth.”

Historically, the EPA has adjusted the standard annually to keep up with actual production. Biofuel companies have always exceeded the limit, and the excess product has been rolled over into the next year’s cycle, Eaton explains. Since the agency’s proposal came out in November, however, biofuel priceshave tanked, he says. The EPA is expected to finalize the new rules in June.

Blue Ridge produces nearly 1 million gallons of biofuels made of various combinations of soybean oil and various recycled oils. The company collects oil from about 1,000 clients in the Asheville area and beyond, Eaton reports.

More than 100 biodiesel companies and other affected businesses across the country have also sent the president a letter echoing those concerns and predicting significant damage to the industry if the proposal is adopted in its current form. Both letters call on Obama to restate his previous support for the industry. In 2008, the president called biodiesel “an example of how we can create jobs, new industry, save our environment [and] recycle products that might otherwise go to waste.”

In response to the proposal, about 80 percent of U.S. biodiesel producers have scaled back production, and nearly half have completely halted production at a particular plant, according to a survey by the National Biodiesel Board. Many say they’ve already reduced or anticipate reducing the number of employees.

Foothills Bio-Energies, notes Dellinger, has already been “idling on production” for most of this year. Blue Ridge Biofuels is still producing, says Eaton, but “We have already laid off some employees, and we expect things to get worse. [The proposal] could potentially shut down a large part of the industry. I don’t want to say it will shut BRB down, because we’ve always been pretty scrappy and able to weather these storms, but … you’re going to see a lot more shutting down.”

Meanwhile, the Cellulosic Biofuel Producer Tax Credit, which was intended to spur production of particular types of biofuels by granting producers a $1.01 per gallon credit, has had a shaky run over the past several years. Initially scheduled to expire in 2009, the credit was first extended to the end of 2012 and then again through 2013. The Senate Finance Committee has approved a bill to retroactively extend the credit through 2015, but Congress is unlikely to vote on it before November, says Eaton.

Not knowing whether Congress will extend the tax credits once again, he continues, has definitely been challenging. “You can imagine it’s hard to run a business when, from one year to the next, you can lose up to 25 percent of your revenue,” notes Eaton.

“Most people agree that we need to start moving away from fossil fuels and finding renewables that are better for the environment and better for local economies,” Eaton points out, “But we definitely need federal support.”